"California no longer has low-hanging fruits – we don't have any medium-hanging fruits, and we also don't have any high-hanging fruits," Schwarzenegger said, explaining the cuts Friday at a news conference in Sacramento. "We have to take the ladder from the tree and shake the whole tree."

Governor Schwarzenegger's proposed cuts are spread over many public programs, but the largest would eliminate the CalWORKS welfare program and do away with child care funding except for preschool and after-school programs, saving the state $1 billion and $1.2 billion, respectively.

State Democrats decried the plan, and promised another fight in the state's legislature this summer. “The governor’s suggestions are clearly more reflective of a hyper-partisan political agenda than in finding real solutions to our problems," said Assembly Speaker John A. Pérez in a statement. Democrats pointed out that Schwarzenegger's plan doesn't propose any tax hikes, and leaves in place $2 billion in planned corporate tax breaks.

"Now he comes forward with a vision that says children have no value," Senate budget committee chair Denise Ducheny told the San Jose Mercury News. "To tell 500,000 families they shall be homeless in lieu of delaying corporate tax breaks is hard to understand."

Schwarzenegger cited three factors as contributing to the budget shortfall: legislative resistance, reimbursement due the state from the federal government, and court decisions that blocked trims to health and human services programs. "Because these judges have prevented us from using a scalpel to go and trim some of those programs," he said, "we now have to use the ax."

Part of the budget shortfall also comes from lost revenue from the Tranquillon Ridge offshore drilling project. The plan was projected to bring $100 million a year to state coffers, but was shelved by Schwarzenegger earlier this month after the explosion and sinking of a Gulf Coast oil rig sent millions of gallons of crude oil into the waters off Louisiana.

Funding for higher education saw the lone boost in Schwarzenegger's plan, a key demand of the "Day of Action" protests in March.

Observers say Schwarzenegger's proposed elimination of CalWORKS is likely a ploy for leverage. He proposed the same thing last year, drawing sharp criticism, but turned it into concessions on welfare cuts he otherwise wouldn't have been able to get out of Democrats. This time around, it's likely reforms to the state's budget process and pension system that he seeks. In his remarks Friday, Schwarzenegger went directly from lamenting the state's "skyrocketing" pension system to saying "I now have no choice but to stand here today and to call for the elimination of some very important programs."